Macy's 2014 Annual Report Download - page 3

TO OUR shareholders:
In 2014, we extended our winning streak for increased sales
and earnings at Macy’s, Inc. while also launching plans for our
next phase of continued improvement for profitable growth.
We are particularly proud to have met our long-term objective
for a profitability rate that places us among best-in-class
retailers, as measured by Adjusted EBITDA (earnings before
interest, taxes, depreciation and amortization) as a percentage
of net sales. We now are shifting our resources and energies
to growing the topline faster while maintaining this high
profitability rate.
Our company has been on an extraordinary journey of
reinvention. We have created Macy’s and Bloomingdale’s
omnichannel brands that are nationwide and increasingly
global, and achieved significant increases in operating earnings
and cash flow. We became a magnet for the best talent in
retailing at all levels of our organization, and added $18 billion
to our market capitalization since 2009. In the past six years,
our Total Shareholder Return has been nearly 700 percent.
2014 Financial Highlights
Here are highlights from our fiscal 2014 financial results, which
are presented and discussed in greater detail in the company’s
2014 Form 10-K (including information on pages 17 to 20
regarding our non-GAAP financial measures):
• Comparable sales on an owned plus licensed basis grew
by 1.4 percent, and by 0.7 percent on an owned basis.
This was our fifth consecutive year of comparable sales
growth. Macy’s, Inc.’s total sales have grown by nearly
$5 billion over the past five years, even with a somewhat
smaller portfolio of stores, as we have embraced an
omnichannel approach to business.
• Adjusted EBITDA as a percent to net sales was 14 percent,
rising from 13.6 percent in 2013 – and up from 11.3 percent
in 2009. Reaching the 14 percent level has been a long-
standing goal, and we fully expect to remain among the
most profitable retailers.
• Earnings per diluted share were $4.40, an increase of
10 percent from $4.00 in 2013, excluding certain items
(merchandising and marketing restructuring, store and
field adjustments, store closings and a premium for early
retirement of debt in 2014; impairment, store closings and
other cost initiatives in 2013). On this basis, earnings per
share rose by double digits for the sixth consecutive year.
Including these items, earnings per diluted share were $4.22
in 2014, up from $3.86 in 2013.
• Return On Invested Capital – a key measure of how
efficiently the company uses its capital – rose again in 2014
to 22.4 percent, up from 21.5 percent in 2013. This was our
sixth consecutive year of improvement in ROIC.
Refinement of M.O.M. Strategies
A key factor in Macy’s success has been the consistent and
disciplined execution of our core strategies of My Macy’s
localization, Omnichannel integration and Magic Selling customer
engagement, which are known by the acronym of “M.O.M.”
M.O.M. remains the blueprint for the Macy’s brand today –
with each element of the strategy coming closer together to
work holistically. My Macy’s, Omnichannel and Magic Selling
are no longer very separate, distinct subjects. They feed
and support each other. We also have become very
proficient at applying what we learn to continuously
improve our business for our customers. We know we
must keep moving forward with fresh thinking.
My Macy’s localization, developed in 2008 and launched
nationwide in 2009, remains a differentiator and sustainable
competitive advantage for Macy’s. Our intention has always
been to deliver a merchandise assortment and shopping
experience in each location that meets the need of the
local customer.
Now with six years of My Macy’s experience and a significant
amount of progress, we are refining our approach to localization
with a renewed emphasis on driving sales growth with a process
that is streamlined and leads to quicker decisions.
As a percent
of net sales
ADJUSTED
EBITDA
1